Pound (GBP) Firms on Brexit Deal Hopes, Hitting Five-Month High vs USD
The Pound (GBP) trended higher through yesterday’s trading session, with the Pound to US Dollar exchange rate climbing to a five-month high. Fresh Brexit optimism supported GBP exchange rates as the latest round of negotiations got underway.
This came in response to Downing Street’s suggestions that a post-Brexit trade deal with the EU could be reached next month as UK negotiators ‘continue to plug the gaps’ in talks.
Turning to today’s session, the publication of the UK’s consumer price index earlier this morning looks to extend the Pound’s gains after domestic inflation jumped to a four-month high in July.
Euro (EUR) Struggles on Second Wave Fears
While the Euro (EUR) rocketed to a fresh two-year high against the US Dollar (USD) on Tuesday, the single currency struggled to find momentum against many of its other peers.
This came amidst growing concern over Europe’s current coronavirus situation as surging European infections stoke fears that the continent is facing the dreaded second wave, which could see lockdown measure re-introduced in many countries.
Meanwhile, the Eurozone’s final CPI reading for July may put more pressure on the Euro this morning, with forecasts expected to confirm the bloc slipped into a state of deflation.
US Dollar (USD) Tumbles to Two-Year Low Against EUR on Washington Impasse
The US Dollar to Euro exchange rate collapsed to a new two-year low yesterday amidst some aggressive selling. USD also hit a low against GBP as the Pound to US Dollar exchange rate hit a five-month high.
The unrelenting USD sell-off came in part from the failure by US lawmakers to pass another coronavirus stimulus package before Congress adjourned for a month-long recess.
On top of this, falling US Treasury yields accentuated these losses as well as the expectation that the Federal Reserve will need to maintain its expansionary monetary policy for longer in light of persistent coronavirus infections and the lack of fiscal stimulus.
Coming up today, we may get more insight into the Fed’s future policy plans with the publication of the minutes from last month’s Federal Open Market Committee (FOMC) meeting.
Canadian Dollar (CAD) Undermined by a Slump in Oil Prices
The Canadian Dollar (CAD) found itself on the defensive on Tuesday as more than a 1% slump in oil prices undermined demand for the commodity-linked ‘Loonie’.
This downtrend in the ‘Loonie’ may extend through today’s session as well, if Canada’s latest CPI figures report a slowing of domestic inflation in July.
Australian Dollar (AUD) Subdued amid US-China Tensions
The Australian Dollar (AUD) was directionless overnight on Tuesday as renewed tensions between the US and China dented market risk appetite. Tensions rose as the US government made moves to restrict Huawei’s access to commercially available microchips.
New Zealand Dollar (NZD) Buoyed by Coronavirus Hopes
The New Zealand Dollar (NZD) edged higher overnight, recouping some of its losses from Tuesday’s session amid hopes that New Zealand will be able to quickly beat its coronavirus resurgence.